State Budgets Boosted by Bush Tax Cuts, Analysts Say
By Randy Hall
CNSNews.com Staff Writer/Editor
December 21, 2005
(CNSNews.com) - After battling red ink for the past few years, state officials are watching their revenues increase to create budget surpluses, a development some analysts attribute to the financial growth caused by the tax cuts signed into law by President Bush in 2003.
According to the most recent Fiscal Survey of States released by the National Association of State Budget Officers (NASBO), a handful of states still had to scale back their originally budgeted amounts in 2005 when revenues failed to meet projections.
But that's far short of the number of states -- 37 -- that had to do the same thing during the 2003 and 2004 fiscal years combined. And whereas five states in 2005 revised their budgets downward by $634.6 million, the 37 states in the previous two years had to find $14.5 billion in savings.
Dan Mitchell, senior fellow at the conservative Heritage Foundation, told Cybercast News Service that "there's no question state government finances are very, very closely tied to the health of the national economy."
Forty-two states ended up collecting more revenue than they expected in the fiscal year that ended in June, the NASBO report states. Only in Alabama, Maryland, Michigan, New Jersey and South Dakota did revenue projections match the FY 2005 amount budgeted. Just three states -- Indiana, Missouri and Washington -- reported less revenue than originally anticipated in fiscal year 2005.
And the good news is expected to continue through the 2006 fiscal year, when proposed state budgets anticipate an average 5.2 percent increase in revenue and spending growth of about 3.8 percent.
One of the success stories of the past few years is Massachusetts. When Republican Gov. Mitt Romney came into office in January 2003, the state had a budget deficit of about $3 billion. Currently, Romney and the Democratic legislature expect to end the 2006 fiscal year with an estimated surplus of $850 million and a "rainy day" fund of $1.7 billion.
Across the country, Montana is using a record overflow of about $300 million to give its citizens property tax relief, while New Mexico is using part of its projected $1 billion surplus to build a 21st-century airport to launch passengers and cargo on suborbital spaceflights.
There's no question, Mitchell said, that the 2003 federal tax cut passed by Congress and signed by President Bush "had a very good effect on the economy." State governments, he said, "are benefiting immensely, albeit indirectly," from the $350 billion tax relief package.
"Ever since the 2003 tax cut, we've basically had 4 percent economic growth," Mitchell said. "That's very good by global standards. Countries like France and Germany are happy to get 1.5 percent growth, and we've had 4 percent growth for a multi-year period."
Since many states tie their tax codes to the federal definition of income, the Bush tax cuts produced "an inadvertent tax cut at the state level," Mitchell said. "But there's no question that the effect of that is small compared with that of faster economic growth."
Let this be a lesson to liberals, low taxes is good for the economy. What am I saying, they'lll never learn.